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Solo 41k S-Corporation Controlled Group Question

9/22/2020

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QUESTION:

I have a S-Corp, 100% owned by me, I pay myself on W2. Let's call this S-Corp as "MySCorp".
My wife has a S-Corp, 100% owned by her, and has a full time employee on W2. Let's call this as "WSCorp"

Now, all of MySCorp's revenue is coming from WSCorp. I do consulting on behalf of WSCorp for it's clients and I bill WSCorp for my work.

The business relationship is like: I perform consulting work for end-clients on behalf of WSCorp, WSCorp bills the end-client for the consulting work I did. I bill the WSCorp from MySCorp for the service I provided.

Here are my questions:

Can I start Solo 401k for myself from MySCorp? If yes, the next question is: can i bring my wife on to MySCorp's payroll and have her as part MySCorp's solo 401k plan?

ANSWER:

You both would not be able to open a Solo 401k because your wife has a full-time employee, and due to the affiliated service group rules, you would be considered affiliated to her business. Furthermore, your situation could also be a controlled group because the default is that ownership held by a spouse is attributed to other spouses for purposes of analyzing whether a controlled group.  
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    Author


    George Blower is a principal of My Solo 401k Financial LLC and also serves as the General Counsel with responsibility for providing all legal services to the organization.  

    Prior to joining My Solo 401k Financial, he served as general counsel for a subsidiary of a Fortune 500 financial services company.  

    He received his bachelor’s degree in economics at the University of Michigan in 1998 with honors. He received his juris doctorate from Harvard Law School in 2001. He is a member of the Michigan and Ohio bar associations.

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